AfCFTA Overview

1. OVERVIEW: THE AFRICAN
CONTINENTAL FREE TRADE AREA
(AfCFTA)
ECDC WEBINAR
“Prioritising Intra-Africa Trade”
28 July 2020

2. African Integration Objectives
• African integration is a longstanding continental objective
• Integration seen as essential to overcome the limitations of small fragmented
economies established under colonialism
• South Africa takes a Developmental Integration approach
• We recognize that the major barrier to intra-regional trade is not the tariffs per se
but constraints in the real economy that include under-developed production
structures and inadequate infrastructure
• Development integration thus combines market integration (trade liberalisation)
with infrastructural development and industrial policy cooperation to foster
regional value chains

3. Intra-African Trade
• Africa’s share of world trade estimated at 3%.
• Intra-Africa trade at between 16% - 18% compared to intra-Asian trade at
52%, intra-North American trade at 50% and intra-EU trade at 70%.
• Although Intra-Africa trade low:
- Africa’s exports to rest of the world dominated by commodities – oil,
minerals etc;
- Africa is by far the second most important export market for most
African countries behind Europe;
- 7 African countries count Africa as their main export market and 25
count it as their second most important market;
- Over three quarters of intra-African trade takes place within regional
trading blocs; and
- Intra-Africa trade largely in value-added manufactured products.

4. Strategic Importance of Africa to SA
• South Africa’s major export destinations: rest of Africa; EU, and China
account for almost 62% of SA’s total merchandise exports.
• African market was a destination for 26.3% of South Africa’s exports in 2018.
• In 2019, South Africa’s 55.6% of exports to Africa were manufactured
products
• SADC is the most significant African trading bloc for SA’s exports and
imports, and accounts for more than 70% of all SA’s exports to Africa.
• Key markets in SADC are Botswana, Namibia, Mozambique, Zambia and
Zimbabwe.

5. The AfCFTA: Key Features
• The AfCFTA sets out a framework for tariff liberalisation across Africa,
the harmonisation trade related rules to encourage greater flows of intra-
African trade.
• Critically, it preserves current sub-regional arrangements such as SADC
as building blocs
• The AfCFTA involves negotiations amongst Members/Regions without
existing preferential arrangements in place
• Reciprocity but also variable pace for liberalization to take into account
different levels of economic development across the continent

6. The AfCFTA: Benefits
• Enhance intra-African trade through:
- Progressive elimination of tariffs
- Rules to manage non-tariff barriers
- Facilitate cooperation on customs, trade facilitation and transit
- Enhanced cooperation on technical barriers to trade and sanitary and phyto-
sanitary measures
• Enhance legal certainty and predictability of market access
• Establish due process in resolution of trade disputes
• Can stimulate Africa’s industrial development and employment
• Can enhance investor climate in Africa
• New market access opportunities - North and West Africa

7. AfCFTA - Progress
• The AU launched the AfCFTA negotiations at 25th Summit on 15 June 2015 in
Johannesburg
• The AU Heads of State adopted the legal instruments establishing the AfCFTA
at Summit on 21 March 2018 in Kigali
• Summit in Niger, in July 2019 launched the operational phase
• 54 out of the 55 AU members signed (not Eritrea)
• 28 countries ratified the AfCFTA

8. AfCFTA - Progress (2)
• Concluded Legal Architecture
– Agreement establishing the AfCFTA
– Protocol on Trade in Goods and Annexes
– Protocol on Trade in Services
– Protocol on the Rules and Procedures for the Settlement of Disputes
• Adopted Modalities for Tariff Liberalization
– 90% of the scheduled tariffs liberalised over 5 years (LDCs = 10 years)
– 7% sensitive tariff lines should be liberalised over 10 years (LDCS = 13 years). 3%
can be excluded
– Tariff phase down in equal installments (e.g. for SA, 20% cut per annum on the 90%
over a 5 year period)
• Adopted Modalities for Trade in Services
– 5 services sectors (Financial, Tourism, Transport, Communication, Professional)

9. AfCFTA – Outstanding Issues
• Tariff Offers (of 28 members that have ratified, only 11 have submitted offers)
• Agreement on rules of origin for sugar, autos and clothing and textiles
unfinished.
• Just 6 members have submitted offers for trade in services.
• 1 July 2020 deadline for operationalizing the AfCFTA delayed due to the
pandemic. New date under consideration
• Negotiations on Phase II issues (Protocols on Investment, Intellectual
Property and Competition) delayed

10. AfCFTA – Risks/Challenges
• Difficulties in agreeing on RoO
• Nigeria not yet ratified - Impact on ECOWAS participation
• Trade liberalisation produce gains and losses in production, trade and employment.
Management of gains/losses key to the sustainability of the agreement and its
implementation
• Risk of transhipment (3rd party products preferential access to domestic markets) -
Requires effective capacity to monitor and enforce RoO at ports of entry.

11. Next Steps
• Meeting the challenges of the C-19 pandemic on health and the economy
are immediate priorities - Highly uncertain context
• Some adjustment in timing for negotiations and operationalisation of the
AfCFTA
• Some adjustment in level of ambition, particularly if RoO not agreed?
• For sustainability and legitimacy, Africa’s integration must deliver shared
benefits
• Trade integration and liberalisation should be accompanied by programmes
to support African industrialisation and regional value chains
• AfCFTA brings us a step closer to realising the historic vision of an
integrated market in Africa

12. Thank you